Interest rates do not have to be identical across the whole euro area, but it is unacceptable if major differences arise from broken capital markets or concern about a euro area break-up.
Sentiment: NEGATIVE
Eurobonds are absolutely wrong. In order to bring about common interest rates, you need similar competitiveness levels, similar budget situations. You don't get them by collectivizing debts.
It is obvious that the monetary union among 17 very different European countries does not work. As an economist, I know that the Eurozone is not an optimum currency area, as defined in economic theory.
I can understand countries don't want to join the euro, but they cannot impede the consolidation and strengthening of the eurozone.
So if the euro, if Euroland is to become a reserve center, if the euro is to become a reserve currency, Euroland will have to have a deficit in its overall balance of payments.
As for the single market, the E.U.'s landmark achievement, there is no question that a euro zone breakup would severely disrupt its operation in the short run.
The euro is a vital issue for Germany. There is no other country that derives as much benefit from the common domestic market and the monetary union as Germany.
There was a real fear that a euro-zone bank might fail, that we'd have a sovereign debt problem in one of the larger European economies. That's dissipated, thanks largely to the action of the European Central Bank.
I mean, Dodd-Frank is strangling small community banks. It doesn't make any difference what the interest rate is. They're not - they're not going to loan the money because they can't make any money for one thing plus the cost of compliance.
Interest rates are used to achieve overall economic stability.
The only way to have several currencies from divergent nations lumped together is if they are culturally close, such as Germany, the Netherlands and Austria. If they aren't, it simply can't continue to work.
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